Most Florida residents know about the homestead exemption, the state’s property tax benefit that reduces the assessed value of a primary residence. Fewer know about homestead portability. When you sell your current home and purchase a new primary residence in Florida, you may transfer (port over) to your new home the homestead property tax benefits from your former home. Utilizing homestead portability can reduce any potential tax increases that arise as a result of moving to a new home.
Anyone who has a homestead residence in Florida and is considering purchasing a new primary residence in the state should understand how portability works. Portability is of particular relevance for seniors who are interested in downsizing but are concerned about a possible property tax increase.
Florida Homestead Exemption Basics
Your home has two values: fair market value, and the assessed value the property appraiser assigns to it. Property taxes are based on assessed value. The Florida homestead exemption reduces your property’s assessed value, deducting $25,000 from the first $50,000 of assessed value, and another $25,000 for an additional $50,000 of assessed value. Example: if your home’s assessed value is $400,000, you will be eligible for a homestead exemption of $50,000, lowering the assessed value for property tax purposes to $350,000. As you can see, your homestead exemption does not affect your local property tax rate directly; it simply reduces the assessed value on which taxes are calculated.
To be eligible for the homestead property tax exemption, you must file for the exemption by March 1 by submitting Form DR-501 (“Original Application for Homestead and Related Tax Exemptions) to the local property appraiser. The exemption renews automatically each year without your taking any action. Your property appraiser will send you a card each year confirming the exemption. If you do not receive this card by mid-November of the prior year, you should contact your property appraiser immediately.
In addition to the basic homestead exemption, there are other types of homestead exemptions available for certain homeowners – for example, seniors with limited incomes, veterans, a veteran’s surviving spouse, active military, those with disabilities, etc. Check with your local property appraiser to determine if you are eligible for any of these additional exemptions.
Note: Do not confuse homestead portability with the estate tax exemption portability, which is altogether different. It is also not related to the creditor protections Florida confers on homestead property.
Save Our Homes Cap Can Be Transferred To New Primary Residence
The Florida Save Our Homes benefit is another attractive feature that comes with the homestead exemption. Designed to prevent homeowners from being taxed out of their homes, Save Our Homes places a 3% annual cap on your primary residence’s assessed value, regardless of any increase in market value.
When you buy a new primary residence in Florida, the homestead exemption does NOT automatically transfer to your new home. You must apply for a new homestead exemption by filing Form DR501 mentioned above. At the same time, you can apply to have the Save Our Homes tax benefit transferred to your new residence by filing a “Transfer of Homestead Assessment Difference” form. You have until January 1 of the third year after giving up your prior homestead exemption to request the new exemption and claim exemption portability. The tax benefit that may be ported over to your new home is capped at $500,000.
Examples of Portability
To illustrate how portability works, let’s say your former home’s market value is $400,000. With your homestead exemption, the assessed value is $300,000. The Save Our Homes Tax Benefit is therefore $100,000 ($400,000 – $300,000).
If you upsize:
New Home Market Value: $650,000
Save Our Homes Benefit Transferred From Former Home to New Home: $100,000
New Home Assessed Value: $550,000
If you downsize:
New Home Market Value: $300,000
When you purchase a less expensive home, only a percentage of the Save Our Homes Benefit may be ported over to the new property. The formula used to calculate the percentage is:
Subtract assessed value from market value of former property: $400,000 – $300,000 =$100,000
Divide by former property’s market value: $100,00/$400,000 = .25
Multiply by new property’s market value: .25 x $300,000 = $75,000
Deduct from market value of new property to determine assessed value of new home: $300,000 – $75,000 = $225,000
For more information about Florida’s homestead exemption and for forms needed to apply, check with your local property appraiser.
Palm Beach County: (561) 355-3230
St. Lucie County: (772) 462-1000
Martin County:(772) 288-5608
Indian River County:(772) 567-8000 ext. 1469
Broward County:(954) 357-6830
Okeechobee County:(863) 763-4422
Miami-Dade County:(305) 375-4712
There is also more information from the Florida Department of Revenue